Mumbai: Gold rates inching closer to 50,000 levels have helped stocks of Titan Company Limited. After six days of consecutive fall, the stock has shown a gain in the last two trading sessions.
In the trade on Thursday, the stock settled to 986.35, up by 37.75 or 3.98 percent in just one session. The previous trading session saw the scrip gain nearly three percent.
The sudden gain is in stark contrast to the investor sentiment in recent times. The scrip's 52 week high of 1,389.85 was posted on 25th October last year while the 52 week low came in more recently on March 24, 2020.
In a Covid-struck era, investors have grown averse to investing in equities and the growing affection towards bullion needs no further explanation. Gold rates have soared by at least 10 percent in the past three months and a significant offtake has been seen in gold loans. In the case of Titan, the recent quarter results have shown mixed performance. Consolidated revenue declined by 4.3 percent thanks to the lockdown. Titan's PAT declined by 2 percent to Rs 342.8 crore owing to high gross margins. Even after lockdown easing, only 85% Tanishq stores and 75 percent World of Titan stores remain operational.
Also Read: Latest Gold rates
Major brokerages are bullish on the stock's 12 month target price. JM Financials has suggested a 'Hold' rating, estimating a 12-month TP of Rs 1,040. Meanwhile, Sharekhan analysts added a 'Buy' call on the stock with a TP of Rs 1,130.
With strong traction to Gold Exchange Scheme, pent-up wedding demand, and gold being the safest asset class for investment, near-term growth prospects are intact for the jewellery business. A Motilal Oswal analysis explained the short and long term profit concerns.
"In addition to the COVID-19 impact, higher prevailing gold prices and the likely lower share of high-value studded jewellery would weigh on profitability. Moreover, management's reluctance to reduce staff costs, while good for long term growth, would have an adverse impact on near-term profitability," said analysts in the note.